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Sustainable Food News

July 21, 2009

Earthbound Farm to acquire organic food firms; Changes Name
Drew and Myra Goodman still retain 'significant' but undisclosed equity
in the company they founded 25 years ago

by Sustainable Food News *
Photography by Mike Walsh

Earthbound Farm, the nation's largest grower of organic produce, said Tuesday it has a fourth investor, HM Capital Partners LLC, which will help it acquire other organic food companies.

The company told Sustainable Food News that as a result of adding the new partner it also formerly changed its name from Natural Selection Foods, LLC to its brand name, Earthbound Farm.

San Juan Bautista, Calif.-based Earthbound also declined to say whether the company remains a limited liability corporation or how much of the company is now owned by HM Capital, which reportedly takes majority positions in companies it historically invests in.

Click on image to enlarge and read caption.

The company did not disclose the financial terms of the deal, but an online private equity trade publication, peHUB - run by ThomsonReuters - first reported on Tuesday that Earthbound received $135 million in debt financing, citing reports published by two debt providers.

Earthbound told SFN that the amount was incorrect and was asking peHUB for a retraction. peHUB told this reporter they had not been contacted about a retraction.
SFN obtained a report by one of the debt providers, Piper Jaffrey, which listed Earthbound as securing leveraged buyout (LBO) financing of $135 million from Dallas-based HM Capital through RBC Capital Markets, resulting in limited leverage of about 1.9x to 2.9x.

LBO transactions are mostly financed through debt and do not typically require a significant equity investment, which is why they are so attractive to private equity firms.

However, the Piper Jaffrey report said the equity contribution was around 50 percent of the capital structure.

In a subsequent interview posted on peHUB discussing the $135 million deal, HM Capital partner Andrew Rosen said his group had been in talks with Earthbound for over two years.

HM Capital has executed over 30 transactions in the food sector exceeding $6 billion in transaction value.

Rosen also told peHUB that the "core salad business isn't exactly ripe for consolidation since we are the largest today. But we can look at other product categories that are organic - it could be within produce or elsewhere."

He also said Earthbound's extensive marketing, distribution and sales network could benefit other organic food companies.

"Most of the companies (in the organic food industry) are relatively small and have difficulty gaining access to consumers," he told peHUB. "We will look at those opportunities and also ways to expand Earthbound's capabilities."

The three original partners of Earthbound - organic produce growers Mission Ranches and Tanimura & Antle, as well as Earthbound founders Drew and Myra Goodman - each owned 33.3 percent of the company prior to the deal.

The Goodman's teamed up with Mission Ranches in 1995 and Tanimura & Antle four years later.

The company said all three still retain "significant" shares in the company but declined to be specific.

Charles Sweat, current president of Earthbound overseeing the company's operations, has also assumed the role of CEO.

"We see tremendous opportunities for Earthbound Farm to leverage its brand, organic acre base and farming expertise to introduce additional organic products," said Rosen in a press release from Earthbound.

Earthbound products are sold in 75 percent of all U.S. supermarkets, the company said.

Earthbound is celebrating its 25th anniversary this year and relies on a network of over 150 farmers utilizing 33,000 acres. The company also said the use of organic practices by the farmers will prevent the release of 10 million pounds of conventional agricultural chemicals into the environment in 2009.

* This article is reprinted via permission of Sustainable Food News

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